As global spending on clean energy technology soars, investors are increasingly looking for emerging opportunities that can still scale with profitable margins.

Projects in the renewable energy space, now considered mainstream energy, no longer offer the returns investors expected just a few years ago, participants in an Aug. 21 webinar hosted by S&P Global Sustainable1 agreed. That has caused an evolution in sustainable investments, they said.

"We've seen this kind of explosion of specialized funds specific to various parts of the energy transition," said Conway Irwin, cleantech research and analysis director for S&P Global Commodity Insights. Some are "looking specifically at firms where there's not so much technology risk left, but they're still relatively small in revenue terms. For large banks and infrastructure funds, we've also seen ... energy transition opportunities that might be slightly outside the comfort zone but still work well within the portfolio."

Within the renewable energy industry there are still pockets of opportunities focused on incorporating clean energy with the grid, said Cindy Jia, head of Americas sustainable finance for the banking and financial services firm ING Groep NV.

"I think there are a lot of opportunities for long-duration storage providers, or even traders, to get in and see how we can better mesh supply and demand," Jia said.

Globally, annual cleantech investments are expected to exceed $900 billion by 2030, according to recent forecasts by Commodity Insights, nearly three times the spending in 2020. Such investments today are on par with upstream capital expenditures by the oil and gas industry.

Global upstream oil and natural gas investments have been virtually flat for several years, and the trend is expected to continue with investments declining in coming years, the Commodity Insights forecast shows. The sagging investments later this decade are driven in part by China's massive conversion from gasoline to electric vehicles, Conway told the webinar.

Capital investments in US upstream oil and gas projects have also been flat in recent years.

The sunny outlook for clean technology notwithstanding, private equity investors who focus closely on returns continue to tread carefully, Jonathan Silver, chair of Apollo Global Management Inc.'s Global Climate Council, told the webinar.

"Only about 10% of what I would call our high-potential climate technology is commercially viable," Silver said. "So wind and solar, yes, but biofuels, no, storage, not yet."

Apollo in 2022 launched a sustainable investment platform to invest more than $100 billion by 2030 in energy transition and decarbonization projects. All such investments go through a special committee that looks at how revenues align with sustainability metrics to ensure that projects are viable.

ING, planning to deploy €150 billion by 2027 on cleantech projects, is engaging with companies to better understand where new opportunities lie, Jia said.

"They might not be clients that fit within our profile if we're looking at revenues and size or capitalization, but for us, we see them as the clients of tomorrow," Jia said. "We have an internal incentive to go out and really engage with those future clients, understand their technology and facilitate a pathway for them to be bankable."